I'm often scared of IL and just recently started knowing about it with the Leo pool but it's mainly because I'm not well informed, so what really matters is how many transactions happen at the pool and you as a liquidity provider can still be ahead of the game since it's all done by the algo? 🤔
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The question you have to ask yourself is pretty simple:
or
If you want the moonbag then an LP is a bad idea unless you believe that both assets are going to moon. In the case of LEO/HIVE or LEO/CACAO both could indeed easily moon together. Anything paired to USD is a much safer bet, with volatility being reduced by a square-root.
In the example I gave in the OP BTC went x4 but their LP position only went x2.
The same would also be true of Bitcoin collapsed 75%.
The LP would only be down 50%.
Not only that but the LP is still 50% USD so you can liquidate the position after a crash like that and just ape all the USD into BTC and buy the bottom to turn it into a moonbag.
And none of this factors in the yield that the LP is generating.